A Lesson in Unintended Consequences: How Clinton’s Policies Would Raise Effective Tax Rates for the Middle Class
Hillary Clinton is often said to be a policy wonk, deeply enmeshed in specifics and details, but that may be a mischaracterization. In some ways, her approach seems disturbingly superficial, skipping one perceived problem to another with little attention to their underlying causes. In some cases, Clinton seems to have paid little attention to the ... Read more
How Occupational Licensing Undermines Labor Fluidity
A healthy economy requires a fluid labor market. Even when total employment and output are stable, the labor market is in constant motion. Jobs disappear when firms close or downsize. Other jobs appear when new firms open or old ones expand. People move freely from one job to another in search of career advancement or ... Read more
What Does the Unemployment Rate Measure? Labor Market Slack or the Social Stress of Joblessness? Why Does it Matter?
The unemployment rate published monthly by the Bureau of Labor Statistics is one of the most widely watched of all economic indicators. But why? What does it really measure? The news media, politicians, and voters tend to see the unemployment rate as an index of the social stress of joblessness. There is ample evidence to ... Read more
Does the Social Safety Net Provide Enough Incentive to Work?
One of the most common criticisms of social safety net programs is that they discourage work. As House Speaker Paul Ryan has put it, they risk becoming a “hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” ... Read more
Deconstructing ShadowStats (Part 2): In Search of an Alternative Measure of Unemployment
A few weeks ago, I posted a critique of the alternate inflation measure devised by John Williams for his popular website ShadowStats.com. Several responders asked if I could also comment on Williams’ alternate unemployment rate. Here, reproduced with permission is the latest unemployment chart from ShadowStats. Like William’s inflation rate, his unemployment numbers run far ... Read more
As Unemployment Rate Hits a New Low, More Slack Remains in the Labor Market than Meets the Eye
The Bureau of Labor Statistics reported today that the unemployment rate dropped to 5.6 percent in December, a new low for the recovery. For the first time in years, the unemployment rate has fallen to the range of 5.25-5.75 percent that the Fed considers consistent with its mandate to maintain full employment. In the same ... Read more
Universal Basic Income vs. Unemployment Insurance: Which is the Better Safety Net?
A universal basic income (UBI) and unemployment insurance (UI) are two possible forms of social insurance for an economy in which job loss is a significant risk. Which works better? How generous should either program be? Would a combination of the two be best of all? These are the questions that Alice Fabre, Stéphane Pallage, ... Read more
Five Reasons Not to Fear Deflation: Which Ones Make Sense?
In a post earlier this week, I explained why a majority of economists fear deflation. They argue that deflation disrupts the operation of financial markets and labor markets in a way that risks touching off a downward spiral. At the same time, they say, deflation weakens the power of monetary policy to reverse the downward ... Read more
Why Should Europe (or Anyone Else) Fear Deflation?
This is the first of a two-part series on deflation, which continues with “Five Reasons Not to Fear Inflation: Which Ones Make Sense?” This additional post updates the euro deflation story through December 2014 and discusses the impact of oil prices on deflation in Europe. Europe is fearful as it teeters on the brink of ... Read more
A Universal Basic Income and Work Incentives. Part 2: Evidence
In Part 1 of this series, I outlined some basic economic theory regarding a universal basic income (UBI) and work incentives. By a UBI, I mean an income support policy that provides a set monthly benefit to every citizen. A UBI, as I define it, would to everyone, regardless of income, wealth, or employment status. ... Read more